All Forum Posts by: Sue Hough

Kristina,

 First off I’d like to shake your hand and give you a big hug for sincerely trying to protect your parents investment!   You are a wonderful woman. Second I’d like to shake your hand for having all of the numbers to provide a positive cash flow. 

 Now that I’ve gotten all of the good vibes going, there really is no way to protect your parents investment should the whole project tank. I did have a similar situation and the bottom line is at the end of the day if the property is worth less than all of the loans there is no way to recoup the money invested.   This becomes especially hard with Family.

 I would advise when you present your calculations you also have a heart to heart about the reality of what an investment is.  I received some very wise advice quite some time ago and I know it is very relevant here; do not invest money you cannot afford to lose. If losing the money you are investing is going to change the quality of your life, don’t do it. 

 I wish you the best of luck ,

Sue Hough

Geoff,

Your numbers look good, just a couple of items which can go south and it’s best to be prepared; are your construction numbers solid - do you have written bids from contractors?  Have you included a 10% “over run” to your total construction budget, believe me this is necessary?  Is your market selling that quickly?  

Just a few thoughts to consider to avoid a potential pitfall.  Otherwise, it looks like you have a great opportunity!

Good luck,

Sue Hough

James,

From a cost and containment perspective only; apartment buildings are the way to go.  One location reduces time, which is money.

From a selling point; I agree with @Michael Ealy.  They tend to be more difficult to sell with much lower profit margin at the table.  But the opportunity to make money as a landlord far outweighs this.  Keep in mind, there is “opportunity” to make money as a landlord, that does not guarantee it will be there.  It is hard work and a lot of sleepless nights taking care of tenants and all of the problems associated with a large building.

I do love a two-flat or SFH for fix and flip purposes, in part because I am crazy...LOL I can't help myself, I do love the construction side of things.l But I digress...

Run the long term numbers, as I am sure you already know, and compare the three options side by side.

Good Luck!

Sue Hough

Congratulations Shannon and keep us posted!  The fact you and your father are working together is so heart warming, I feel all gushy inside :). And I absolutely love the fact you are doing the work, that is how I learned and here I am 21 years later:)

WAY TO GO!

Rafie,

Your feelings sound normal!  I’m sure that doesn’t make things any better.  As a contractor and investor I strongly advise using a schedule and make sure it is realistic.  You can ask your trades how long their portion is and fill in the blanks.  This will elevate the chaos and give you a sense of control and know, to some degree, what the future holds.

Although I use a commercial version, this planner looks great with gantt chart, colors and ease of change; QuickPlan - Project Management by Hao Li. https://itunes.apple.com/us/app/quickplan-project-management/id782346977?mt=8

You stated all of your trades are there working, that may cause a lot of confusion.  There is a standard work flow we use in the industry, (for example plumber is first, then HVAC and so forth) and if you follow it, your project will run smoother and your trades will be happier with you.  Here is a simplified approach, please modify as you see fit for the scope work.

Demo

 Frame

 Windows

Plumber

HVAC

Electric

Frame again, to include back-back out for drywall and repair anything the previous trades moved

 Insulation

Drywall finish and tape, and prime

Flooring, Tile first then HWF (do not install carpet yet)

Cabinetry

Finish trim

Paint

Countertops

Finish Plumbing

Finish Electric

Finish eveything else; hardware, mirrors, carpet, etc.

Smile, sit back, and have a hard stiff drink!!!  You did it :)

Good luck,

Sue Hough

Devon,

Way to go!!  You’ve made a very scary step and you should be very proud of yourself.  I have been an investor for 21 years and a General Contractor for 18 years.  I teach classes to new investors, but would be happy to work with you gratis, your story is wonderful! Message me and we can connect directly.

Good luck,

Sue Hough

Michael,

 Some of your assumptions are based on the neighborhood turning into a family community. I don’t think that’s possible with the close proximity to college. It sounds like you might be getting very emotional about this opportunity. Based on your numbers it’s extremely risky,  make your decision solely based from the numbers. 

 Good luck, 

Sue Hough

Mike,

 Welcome to the real estate community! I can only comment on my personal experiences so here goes. 

1.  Money in the stock market is definitely a safer long-term investment. 

2.  Real estate investing is wonderful, but it has its pitfalls and unfortunately most people don’t share those with you. If somebody tells you they haven’t lost any money in real estate it’s because they haven’t been  doing this for long or they’re being untruthful.  Too many people in this industry lead newbies to believe this is a get rich quick plan,  that is a flat out lie. 

3.  A good positive real estate investment which is based on numbers and facts rather than emotions can be a very profitable endeavor.  It does take time and a lot of effort.  Many of your projects will make money and some will lose.  It is true of all investments.

4.  I believe in the old adage, don’t put all of your eggs in one basket. Pick a number within your financial portfolio that you are comfortable losing. That is the amount you are able to invest in real estate. 

 Good luck, 

 Sue Hough

Michael,

 I totally agree with the other comments regarding the construction costs and having a  Rock Solid construction crew. One of the reasons I teach construction and believe in it so strongly, it is the single greatest factor that will destroy a project. Please research your numbers more closely with reputable contractors and make sure you get those prices in writing. 

 On a different note, you’re “all in” number is missing a few items which could make or break this deal in itself.  What are your holding costs;  insurance, utilities and your loan. 

 Once you are able to establish all of your real numbers  then you would be able to analyze this deal. As it is, there are too many numbers which will not give you a good answer. 

 Good luck, 

Sue Hough

Stacy,

 As an investor of 21 years, I agree wholeheartedly with Mark, I love houses with mold because they are instant equity. 

 I would like to start out by stating the EPA does not have any protocol or licensure for the removal of mold in residential homes ( I am not aware of any states which require licensure). In addition, they do not offer a  standardized safe measurement for mold in residential homes. This is typically due to the fact mold growing in residential homes is the same species of organic mold which grows naturally outside. The “black” mold which can be very toxic to some people, is mold which grows on certain chemicals which are not typically present in a residential home,  it does not refer to the color of mold. 

 As several of the other comments above, the most important thing you need to do before removing any mold is find the source of water and make sure that is elliminated. Mold cannot grow without water, convexly it will continue to grow as long as a there is water. Removing mold inside of the home is relatively easy and inexpensive. It does require some effort and a lot of scrubbing :)   There are many step-by-step videos available online to show you how to do this, but the basic premise is the following ;

1.  Remove all drywall, insulation, carpet  and all other removable items which are affected.  You want to expose all lumber.

2.   Run dehumidifiers for at least three-five days to reduce the moisture in the area.

3.   This is where you want to make sure the studs and joists are in good structural condition, which basically means the wood is not soft.  If you come across sections of lumber which are soft, you would have to replace them.

4.  Scrub,  using a wire scrub brush,  all of the affected areas with a cleaner specifically for removing mold. This can be as simple as 1c bleach per 1 gallon water.  You can also find additional cleaning products online. 

5.  Run your dehumidifiers again for about three days.

6.   Paint the affected surfaces with an oil based primer such as Zizzners,  to help protect the surfaces from re-infestation.

 I have never been a fan of hiring a mold remediation “expert“  due to the fact there is no licensure and anyone can call themselves an expert.  Plus they are a very expensive option. As you can see mold removal is not that complicated or expensive.  Having said that, sometimes it may be a good choice for you if you are flipping this house and you want  to divert some of the liability.   If you use an outside source read their contract thoroughly so you know what you were entering into. Most mold remediation experts do not guarantee their work once they leave as mold is a natural occurring organic growth. 

 Good luck to you and happy flipping! 

Sue Hough